Toys 'R' Us Liquidation Puts Hasbro's Stock In a Vicious Downtrend

What to notice about Hasbro (HAS) here? For one, the name has now obeyed Fibonacci's 61.8% re-tracement levels to both the upside,and the downside before hitting something solid. The name is clearly, at least to me...now in a downtrend. Relative Strength. Money Flow, and the daily MACD all support this. On top of that, this name appears to have never truly recovered from the "death cross" experienced back in September when Toys R Us initially filed for bankruptcy.

Enter the Pitchfork. The Pitchfork model suggests that support for the name could deteriorate to the 85 level later this month, and possibly as far as 82.50 by early April. Would I short the stock? I am not so bold. However, if I were one to place a negative bet on the name, but I was also risk adverse, there is a direction that I might go.

Hasbro reports quarterly earnings on 9 May. You see the Pitchfork. You know the news. April 20 87.50 puts on this name went out at 2.53 last night. Purchasing one contract will cost a trader $253 (at the last sale). Were said trader to write the April 20 85 puts in conjunction with that purchase (Those puts went out at 1.55), the trader would then have reduced his or her debit on these positions to 98 bucks. The positive is that the potential for profit on these positions is the 2.50 (250 clams) between strike prices less those 98 clams. Capeesh?

In other words, the trader risks $98 up front. If Rome burns, the trader puts the shares to someone else at $87.50, and in turn someone else might put the shares to the trader at $85, locking in the (net $152) profit with no net equity exposure. This is known as a "Bear Put Debit Spread.'